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Applied Materials and GM take morning headlines

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Traders are looking at a modestly lower open for stocks as yesterday's after the market close earnings disappointment from Applied Materials (NASDAQ:AMAT) $11.94 has the semiconductor equipment maker ticking by at $11.57 in this morning pre-market trade, while Dow component General Motors (NYSE:GM) $36.05 is called down $1.65, or 4.5% to $34.40 after Banc of America downgraded the worlds largest automaker to "sell."

Banc of America also lowered the firm's projections for GM's free cash flow growth rate to 0% to 2%, representing a 23% decline from current levels. Banc of America also brought into question GM's dividend policy, saying the annual $2.00 per share dividend, which has the annual yield at 5.55% may be lowered as cash flows flatten out.

Dow component Coca-Cola (NYSE:KO) $39.00 looks to bounce from a new 52-week low set yesterday after the company met fourth quarter earnings expectations, but said it would take a restructuring charge of $400 million in 2003. In the recently completed quarter, KO said revenues rose 13.1% year-over-year to $4.8 billion, which was above the consensus estimate of $4.65 billion. Bottom line results had Coca-Cola earning $0.40 per share. The news had KO edging up at $39.41, a 1.05% rise from Tuesday's close.

Fears on "war with Iraq" and lackluster earnings have S&P futures (sp03h) 827.30 trading down 2.5 points. NASDAQ futures (nd03h) 970 are off 2 points, while Dow futures (dj03h) 7,820 are down 19 points.

Fair value for the S&P 500 today is $-0.06. That price will not change during the session. HL Camp & Company has their computers set for program buying at $0.54 and set for program selling at $-1.92.

Last night I received a follow up e-mail from a subscriber where I had posted an observation that he was making as to a downward trend coming into the play in the QQQ at yesterday high of $24.61, which also matched yesterday's DAILY R2 pivot analysis level for resistance. However, I couldn't figure out where the subscriber was getting resistance at the upper-end of a channel.

It turns out he was using a somewhat "unconventional" method to create a channel, which did look to have some technical correlation with the way the QQQ has been traded since January 23rd.

While I was trying to reproduce "his channel" I place a regression channel on the QQQ from more "conventional" means at the recent relative highs set on December 2nd. I find it also correlates with resistance traded yesterday, but also gives an interesting correlation at the WEEKLY S2 level of support.

NASDAQ-100 Index Tracking Stock (QQQ) - Daily Interval

In last night's Index Trader Wrap we looked at the QQQ on a 15- minute time interval. That chart was the same chart above. All I've added to the daily interval chart show above is the Bollinger band (21-day SMA, 2 Std. Deviation) and a downward regression channel from the December 2nd high.

I wont say there is any "right" or "wrong" way to draw a trend. As long as the trend makes sense to the trader and the trader honors the trend in their trading until it is broken, then that is OK in my book. To think that everyone is trading a same set of levels or trends is a fallacy.

Jeff Bailey

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